Fiat Vs Gold
Great piece by Alasdair Macleod, (he is brilliant)regarding fiat, gold and what has been happening. I printed the final conclusion below. The whole piece is long, but if you are into this stuff(as I am) well worth the time.
“Finally, some comments on gold
From the foregoing analysis, it should be clear that in estimating the outlook for gold it is not a question of forecasting what the gold price will be in 2023, but what will happen to the dollar, and therefore the other major fiat currencies. These currencies have shown themselves not fit to be mediums of exchange, only being stealthy fund raising media for governments.
While western market analysts appear to have failed to grasp this point, President Putin certainly has, as his speech in Leningrad last June demonstrated. If he follows through on his comments with action, he has the potential to inflict serious damage on the dollar and the other western alliance currencies. Furthermore, China has also made a major step forward with its agreement with Saudi Arabia to replace the petrodollar with a petro-yuan.
Throughout history, gold, which is legal money, has maintained its value in general terms with only modest variation. It is fiat currencies which have lost purchasing power to the point where from 1970 the dollar has lost 98% of it. The comparison between gold and the dollar is simply one between legal money and fiat credit — the only way in which relative values can be determined between them.
Our last chart will not be a technical presentation of gold, but of the dollar, for which we will use a log scale so that we can think in terms of percentages. Watch for the break below the support line at about 2%.
The modest fall projected by the pecked line is a halving of the dollar’s purchasing power, measured in real money, which suggests a gold price for the dollar at 1/3,600 gold ounces. This is not a forecast but gently chides those who think it is the gold price which changes. Where the rate actually settles in 2023 will depend on President Putin, who more than any technical analyst, more than any western investment strategist, and even more than the Fed itself has the power to set the dollar’s future price measured in gold.
One thing we will admit, and that is when fiat currencies begin to slide to the point where domestic Americans realise that it is the dollar falling and not gold rising, a premium will develop for gold’s value against consumer items and assets, such as residential property, reflecting the awful damage a currency collapse does to the collective wealth of the people.” https://www.zerohedge.com/markets/macleod-gold-2023
Thanks CM
Good article and I am sure readers here are all aware of it. There is something else with needs to be ‘read’ from this chart eg. higher $gold prices and at one time sky-rocketing and most seems to be missing that point which is:
an unbearable life.
Unbearable as such defines Lost Purchasing Power. Everything get more expansive especially goods for daily living (food, energy) while income (of any kind) will always be behind the curve making it unable to be ahead (of the curve). Even GOLD and PM for such take, will not make it. Cause in the environment we are or about to enter, ‘daily goods’ will be get out of stock and not to be re-stocked; first slowely and then suddenly. Sure one can stock up but even that pretty fast you’ll be missing essentials after that stocks get depleted at one point. First slowely: as we are witnessing at this point due to ‘Supply Chain Disruption’ and then Suddenly; due to The GREAT DYING as whole industries are forced to ‘Cancel Production’ potentially to never be re-started.
In general we should not wish for HIGH PM prices! Sure it will come as that train has been set in motions #1 in 1970 and #2 1999/2000. But Higher $GOLD prices should not be something to look for as the environment you will be living at that moment is far from a Nice & Happy. So oke, at certain point you will be rich by an ‘old accounting system’ eg. former ‘World Reserve Currency’ but what can you do with that value if everything around you is Lost & Gone as such is what we are looking ahead for as that train has set on motion 3 years ago. Times are different now fore sure.
We all have heard the expression: you cannot eat Gold and such might be the ‘spell’ for any goldbug.
Higher gold price means lower quality of Life and at this point where the train is running . . . I foresee many Goldbugs dying rich. So what good will higher $Au do. NOTHING GOOD!